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Iran cut off from global financial system

By Don Melvin

Associated Press

LAST UPDATED: 09:56 a.m. HST, Mar 15, 2012

BRUSSELS >> Iran was largely cut off from global commerce Thursday after the company that handles worldwide financial transactions said it was severing ties with many Iranian banks to back EU sanctions against Tehran.

The action by the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, aims to enforce European Union sanctions discouraging Tehran from developing nuclear weapons.

It will go a long way toward isolating Iran financially. SWIFT is a banking hub crucial to oil, financial transactions and other trades and global financial transactions are impossible to conduct without using it.

Because of its reach, SWIFT's decision to cut off some 30 Iranian banks and subsidiaries could hinder not only banking but also the country's lucrative crude oil industry and possibly hurt Iranian households that depend on remittances from relatives living abroad.

"Disconnecting banks is an extraordinary and unprecedented step for SWIFT," said Lazaro Campos, chief executive of the company. "It is a direct result of international and multilateral action to intensify financial sanctions against Iran."

In a statement, the company said the EU decision to impose sanctions "prohibits companies such as SWIFT to continue to provide specialized financial messaging services to EU-sanctioned banks" and "forces SWIFT to take action."

There was no immediate reaction from the Iranian government or the banks involved. Not all Iranian banks are subject to EU sanctions.

Although Thursday's move added no new sanctions, it aimed to maximize the impact of the EU sanctions already approved.

"It's tightening the noose," said Ali Ansari, an expert on the Middle East at the London-based Chatham House think tank. "It will just reinforce what's already been happening."

And that, he said, is increasing Iran's isolation and difficulty in conducting trade and commerce.

In a statement, the European Council — comprised of the government leaders of the 27 European Union countries — said it had "developed the application" of its restrictive measures against Iran.

"In this context, the Council agreed that no specialized financial messaging shall be provided to those persons and entities subject to an asset freeze," the statement said.

In addition to sanctioning Iranian officials and freezing the assets of certain companies, the European Union plans to institute an embargo on the import of Iranian oil in July — an attempt to choke off funding for Iran's nuclear program.

The EU sanctions are aimed at forcing Iran to demonstrate to the international community that it is not trying to develop nuclear weapons. Iran says that its nuclear program is for peaceful purposes only, but officials in many other countries — including the United States and Israel — believe otherwise.

SWIFT and similar services facilitate not only large financial transactions but small ones as well, raising the question of whether the EU directive could have unintended consequences.

Many Iranians, including opponents of the current regime, live abroad and may use these financial transaction services to send small amounts of money to their families back home on a regular basis.

Washington and allies Britain, France and Germany have sought a tough approach toward Iran over the nuclear issue but have run into resistance from Russia and China.

Russia, China and the four Western nations have agreed to meet with Iran in another effort to seek a negotiated solution, but East-West disagreements within the group are greater than ever.

A previous series of talks between the six and Iran ended in failure, the last one more than a year ago in Istanbul, Turkey.

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livinginhawaii wrote:
Interesting to see what happens next. Usually when you corner a wild animal it attacks...
on March 15,2012 | 08:36AM
808Cindy wrote:
I wonder how much the stock markets climb will be affected?
on March 15,2012 | 08:59AM
HD36 wrote:
India and S. Korea are buying more oil from Iran. Wonder if the US will sanction them too.
on March 15,2012 | 11:08AM
Halemaumau wrote:
Nothing will happen, silly people. Iran has been at this game for decades, I'm sure they'll find a way to make ends meet. They've done it before. They're building a freaking nuke for goodness sake. They don't care about anything else. They're right up there with the North Korean's.
on March 15,2012 | 03:54PM
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